Online Reputation Systems

Some like to think of the Net as a digital village, but in fact it’s closer to a digital city. The ability to interact with a billion people on the Net comes with its own costs: Dealing with strangers is risky, and verifying their trustworthiness is expensive – especially on a case-by-case basis.

…

Companies can use reputation systems to enhance customer support while reducing its costs, and to establish trust, thereby increasing the number and quality of transactions. EBay’s feedback forum, which is used by millions of people for millions of transactions every day, is a good example. According to a study of eBay’s reputation system by Paul Resnick, an associate professor at the University of Michigan’s School of Information, highly ranked sellers can charge about 8 percent more than sellers with no reputation, for identical items.

Commerce is all about reputation. Online reputation transcends any single reputation system, but no online reputation system reflects that fact. Somewhere out there someone’s designing a whuffie system — the one ring to bind them all.

Update, November 29. Dick Hardt reminds us that Sxip enables online reputation systems. One Network to bind them all!